Zacks Analyst Blog Highlights: XL Capital, Security Capital Assurance, Patterson-UTI, Cleveland-Cliff and Raytheon

Business Wire, April 11, 2008

CHICAGO -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: XL Capital Ltd. (NYSE: XL), Security Capital Assurance (NYSE: SCA), Patterson-UTI Energy, Inc. (Nasdaq: PTEN), Cleveland-Cliff, Inc. (NYSE: CLF) and Raytheon Company (NYSE: RTN).

See the latest posts to the Analyst Blog: http://www.zacks.com/blog/post_info.html?g=6

Here are highlights from Thursday's Analyst Blog:

XL Capital Still Under Pressure

XL Capital Ltd. (NYSE: XL) is expected to release its 1Q08 results on April 22, 2008, with a conference call scheduled the next day. XL's 4Q07 results missed expectations as a result of impacted of $41.5 billion in losses and write downs related to its operating affiliates and investment portfolio.

The shares of XL have been under pressure for quite sometime due to its relationship with Security Capital Assurance (NYSE: SCA). This has also led to a reduction in the company credit rating by three major rating agencies. The potential liabilities and claims, if any that the company might have to cover because of problems at SCA, create uncertainty about XL's potential earnings.

We maintain our Hold recommendation prior to the release of XL's 1Q08. Based on 4Q07 results, we have lowered our FY08 and 2009 earnings expectations to $9.50 per share and $9.90 per share, respectively, from $10.20 per share and $10.90 per share. At the current price level, XL's shares trade at 3.2x our revised 2008 EPS and 0.59x its 4Q07 book value of $51.16 per share; representing a 51% discount and a 58% discount, respectively, to its peer group medians.

Upping Target for Patterson-UTI

We are maintaining our Buy recommendation on Patterson-UTI Energy, Inc. (Nasdaq: PTEN) shares ahead of the company's first quarter results. While we expect the ongoing land drilling weakness to remain in place at least through this year, we expect steady improvements in fundamentals going forward.

We think that the land drilling market's supply demand fundamentals may already be stabilizing, given the slowing trend in new rig additions and continued strength in the rig count. We also believe that Patterson-UTI's strong financial health puts the company in a better position to face the impact of short-term market fluctuations.

With almost no long-term debt, Patterson-UTI is in solid financial health. The company continues to return cash to shareholders through its growing dividend and share buyback program. After repurchasing $450 million worth of its own shares through two back-to-back authorizations during 2006, Patterson-UTI has authorized another $250 million share buyback program, of which more than 28% has already been used.

Demand Helps Cleveland-Cliff

Cleveland-Cliff, Inc. (NYSE: CLF) has solid fundamentals, rising prices and increasing demand of its products. Strong industrial growth in China has triggered demand for steel, resulting in higher demand for iron ore. The company's portfolio of both established and recent iron ore and metallurgical coal assets positions it to capitalize on global industry dynamics in 2008 and beyond. We believe stronger commodity prices should boost revenues significantly for CLF.

On March 4, 2008, Cleveland-Cliff announced that it has terminated negotiations to sell its 26.8% interest in the Wabush Mines joint venture to ArcelorMittal Dofasco Inc. The company entered into discussions with Dofasco in September 2007, and until the day of publishing this report negotiations had been ongoing. Currently, the stock is valued at 13.1x 2008 earnings of $11.

Maintaining a Buy on Raytheon

Raytheon Company (NYSE: RTN) offers investors strong order bookings, an improving balance sheet, growing cash flow, above industry average ROE, and one of the highest dividend yields in the industry. Solid performance in 2006-07 is expected to continue through 2008.

Buoyed by excellent 2007 fourth quarter results, the company raised its 2008 outlook. Going forward, however, concerns about the long-term growth of defense spending in the face of continuing budget deficits and related to the company's program execution remain significant risks.

Accordingly, we maintain our Buy recommendation on RTN common stock with a six-month target price of $71.75. Price appreciation to our near-term valuation target, coupled with the $0.28 per share quarterly cash dividend, which we deem to be sustainable and secure, represents annualized total return potential of 18.2%.

Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.

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